Apr 10, 2012

The NIZ, Regurgitation and Digestion

Mayor Pawlowski has offered the discontented surrounding municipalities a guaranteed return of their EIT in exchange for dropping the collective lawsuit against the arena project. He would use Parking Authority funds to replenish that loss of revenue. This blog has often referred to the Parking Authority as a Frankenstein that preys on Allentown's poorest residents. The Authority already has the debt service of two recent parking decks; The deck next to City Hall and the deck at 6th and Linden, which was to serve the Arts District. What were they thinking and what is the Arts District? If this scheme comes to pass, the Parking Authority would turn from aggressive to predatory. Bernie O'Hare had an intriguing post today that suggests that the NIZ was really authored by J.B.Reilly, it's chief beneficiary. When one factors in the exclusionary fact that only Allentown qualifies for this law, property owners may have been improperly threatened with eminent domain, $20 million hand money was given to one private developer before any guidelines were publicly announced, would a visit by the Attorney General be in order? UPDATE: 9:40pm> Bernie O'Hare in his post speculated that the NIZ would unfairly drain tenants from other office complexes throughout the valley. I question how successful the NIZ offices will really be? So far, only tenants connected with Reilly have expressed interest. Is Allentown better served by the Hospital Network moving to an office building at 7th and Hamilton, or making a renewed commitment to 17th and Chew Streets? If Reilly builds the office buildings on speculation, will we end up paying for the empty space in some way? According to Pat Browne and Jenn Mann, the NIZ rules are too complicated for us simple folk to understand. How many more surprises can we afford? I read several times that nobody wants to see the project stopped after this much progress. Perhaps the taxpayers of Allentown would be better served by a hole in the ground, rather than an unregulated monster stuffing our taxes in a few private pockets.UPDATE: My comment #6 at 6:40am.

we had success with heydt's hole, eventually the PPL Plaza was built. although pawlowski's hole would be much bigger, and have cost much more, eventually private developers would build real buildings for a real market. with hockey only 40 nights a year, and the Sands already having booked first rate acts as a draw to their casino, the arena is doomed to failure. the hotel is a moronic pipe dream. who would want to deal with 7th and hamilton for a medical appointment? after 5 years of failure, the arena authority will hire a new manager. in 10 more years, allentown will tear it down. i prefer leaving an expensive hole.

Just a thought but if the allentown police started ticketing for loud music from cars,littering,loitering,double parking,J walking,fireworks,etc,etc they would also be a cash cow.Not sure i would describe them as predatory.

scott, i'm coming to that conclusion myself. we had success with heydt's hole, eventually the PPL Plaza was built. although pawlowski's hole would be much bigger, and have cost much more, eventually private developers would build real buildings for a real market. with hockey only 40 nights a year, and the Sands already having booked first rate acts as a draw to their casino, the arena is doomed to failure. the hotel is a moronic pipe dream. who would want to deal with 7th and hamilton for a medical appointment? after 5 years of failure, the arena authority will hire a new manager. in 10 more years, allentown will tear it down. i prefer leaving an expensive hole.

Under Pawlowski’s offer, municipalities would be able to keep “current” EIT revenues from non-city residents working in the zone. The problem lies with the word “current”, which seems to mean what the municipalities were getting before the NIZ existed.

Basically, developers can build taxpayer-subsidized buildings that the City can use to poach businesses from the suburbs - FOR YEARS. This is because of the below-market rental rates in the taxpayer-subsidized NIZ, where the developers don’t have to worry about paying their own debt on their buildings.

So suburban municipalities can not only say goodbye to whatever business taxes they were receiving, but also any EIT revenue from suburban residents who move with their businesses into the NIZ. What a deal!

But the loss isn't only limited to suburbs with businesses moving from that particular suburb into the NIZ. The suburbs can also say goodbye to the EIT of suburban residents (say of S. Whitehall) who work in another municipality (say Emmaus) and whose employer is then lured into the NIZ. Before the NIZ, South Whitehall would have gotten the EIT on their resident. With the NIZ, they get nothing.

When you think it through, you have to wonder why any municipality outside the city wouldn't join the lawsuit.

While I guess we should be happy that the city has finally calculated the amount of EIT being taken from the suburbs, the “deal” doesn’t pass the smell test. I don’t know if the suburban municipalities will accept this deal, but if they do, maybe Pawlowski has a bridge to sell them as well.

@8:42, it is also unclear to me if the deal applies to all municipalities, or only those who filed the lawsuit? as i stated in the post, I question how successful the NIZ will be, even being able to offer substantially lower rents. I know that numerous offices moved out of allentown to more expensive space, seeking a higher quality of life for their employees. i would bet that reilly has built in safeguards to insure his debt service will be met on the public dime, regardless of his occupancy rate.

@8:42 I don't know anything about the EIT or the NIZ, but as regards the last part of your comment, Pawlowski DOES in fact have a bridge to sell them, unfortunately it's the 15th Street bridge so he'll have to cut the offer price on account of the bridge being a "fixer-upper."